The hubs and I are maybe 70% through our first home buying process, and it has been quite different than I expected. We found a beautiful place in the Downtown Jersey City/Hoboken area, just over the bridge and one subway station away from Manhattan. It has the exciting advantage of not charging a 3.6% flat tax on all our income as NYC did.
Less exciting: the process to find and close on the home. Here’s what I’ve learned so far about the ins and outs of home buying.
Finding The Right Place Can Take A Long Time
Admittedly this may have something to do with the fact that I’m a huge data nerd and wanted to be especially knowledgeable before making my first purchase, but we were actively viewing homes for five months before we made our first offer. We started in December which was an incredibly slow period. By February we were seeing real volume. All in all, I probably looked at over 225 listings (I looked at all transactions sold in the past year to give myself a base). I viewed more than 45 properties in person. My agent could mention a property at certain cross streets and I could tell her what the HOA fees were from memory.
Data is Hard To Come By
I spoke with three realtors before I made my selection. With each, it was important for me to evaluate their market knowledge, as that’s what I thought I was engaging an agent for. While they could provide me a recent transactions list, that was about as deep as their knowledge went. What about how fast the market has appreciated each of the last 3 years?
Some of the bigger firms had a market research arm that would share high level stats, but they couldn’t cut it deeper. How does Hoboken look vs. Jersey City? What about this neighborhood of Hoboken which everyone knows is the up and comer?
I ended up building some of this for myself with raw data pulled from online brokerages. It was time-consuming, but it was the only way I could get comfortable making this bet.
The Market Is Not Very Efficient
Two identical units in the same building went to market within four weeks of each other. The condition and upgrades of the properties were the same. The first listed at $825k and sold for $855k. The second listed at $825k and sold for $900k. I guarantee you that the market didn’t appreciate 5.2% in the span of four weeks. It was nuts to me that a different set of buyers doing the rounds three weeks later was responsible for $45k more into the pockets of the second owner. It has made me think hard about what strategy we should use when we sell. Of course, the strategies one uses in a seller’s market are very different than the ones for a buyer’s market, so maybe I’ll put a bookmark on this.
Conventional Knowledge Can Be Wrong…And Expensive
When I reached out to get my mortgage pre-approval, lenders would ask me how my credit was, how much we made, and how much we wanted to put down. I answered those questions the way I had been taught. Specifically, when asked what I wanted our down payment to be, I said 20%. I had read in a dozen articles that 20% was what got you a loan that required no private mortgage insurance.
Well, I got to chatting with one particularly informative lender and some base instinct in me that likes to ask questions decided it couldn’t hurt to ask whether they could extend more debt, say for planned renovations that would increase the value of the property. Turns out they could.
In fact, I then went and called a handful of other lenders and got a few other confirmations. I got offers to extend loans up to 85% and 90% of the price of the home with no private mortgage insurance requirement. Having determined I’d like to borrow a dollar at X% interest, it’s very likely I’m going to think borrowing $2 at X% interest is a net benefit. The best terms I got were from the super secret source for the lowest mortage rates, and it’s no surprise that they were also the ones most flexible on loan percentage.
Between the larger loan amount and discount on market rates, we will save over $145,000 over the life of the loan from one decision.
If I can nail this down, it’s like I worked a full time job for the family just finishing this one project. The moral of this story: It doesn’t hurt to ask.
Be Very Clear What Your Non-Negotiables Are…And Stick To Them
When we started, we had only a few requirements:
- Not noisy/on a busy street (for-resale)
- At least 1,000 square feet
- Prefer elevator
- Would like a third space (i.e. den or convertible alcove)
Here’s the thing. Those last two weren’t actually preferences — they were requirements. And I wasted a lot of time and a lot of heartache looking at units that we ultimately ruled out for not having those two criteria. It wasn’t like I walked in and suddenly realized what it was like to live in a walk-up. Or that visiting a 2-bedroom without a third space educated me about something I was previously ignorant of. I was trying to be too open-minded. I even went to see a few units on busy streets just to “see if the noise really carried into the unit.” Newsflash: it does. It did. It will.
I probably could have shaved 15 hours of extra time if I had been more firm about what I could really live with.
The Purchasing Process Is Extremely Imprecise
At least in our market, people played fast and loose with all sorts of things. Square footage figures could easily be 10% off. In a market charging $600-$700 per square foot, that could amount to over $60k of home value. I don’t know about you, but I wasn’t going to every showing with a tape measure with a plan to map out all the dimensions of each room. It’s scary that this stuff can come up after a contract is signed. My agent told me less than 5% of her clients measured their units prior to the end of attorney review on the contract, and while there is often a home inspection contingency, square footage revelations don’t generally fall under this particular out. It’s buyer beware.
Fortunately we got all our facts lined up before we were locked in with the final contract. I had a scary few days chasing down the master deed, physically measuring the unit, and speaking to appraisers about measurement methodology. If I got this part wrong, it could easily wipe out $50k of value before we had even been handed the keys. Thing checked out, but it took quite a bit of leg work to get the confirmation we needed.
Another way the process gets messy: the contract. In New Jersey, folks use an antiquated template which contains all sort of scary provisions and items that don’t make sense. You are both supposed to sign this scary contract to take the property off the market, and you have a clause called attorney review which lasts 3 days and which allows either party to cancel the contract should the attorneys find them unacceptable. Given how completely inappropriate the template is, every transaction is cancelled within that three day period and negotiations begin anew. The whole system is odd, frightening, and completely impractical. How about signing a contract the first time around that everyone agrees to? I’m told many states do it this way. Alas, it was not to be for those of us who have dreams of homeownership in New Jersey.
Everyone and Their Mother Is Involved In Your Transaction
Seriously, I have lost count how many people I’ve had do deal with as part of this transaction. There’s your agent. The seller’s agent. The seller’s agent’s assistant. Your attorney. Your attorney’s assistant. Your lending agent. Their assistant. Their processor. I like my peace and quiet. Fielding 6 calls a day is overwhelming. They often ask for information they’ve already received. It’s kind of a mess. Fortunately, most of them are fairly nice people, and you get to talking about the weather, and the first house experience, and it’s not all bad. But really, I wouldn’t be surprised if over 20 people were involved in this one transaction. It makes me wonder how many homeowners these people deal with. How many applicants does my lending agent keep track of each month? Is that the reason my file has had the wrong fee schedule in the last four versions of the document? It has taught me I need to stay on top of everyone and triple check the details.
The home buying process has been both way more exciting and more bizarre than I thought. At the end of the day, you get a house you’re really happy with, so it can’t be all bad. We’re still not 100% sure this place will be ours, so I’ll keep you posted. And if I sound like a crazy person the next few weeks, you’ll know why.
What was your experience like? Anything you wish you’d known about home buying before you started?